INTRODUCTION

  The argument we make here is that rather than a uniform digital licence fee, the fee could be levied differentially upon households, using the main elements of the council tax system as the basis for determining the charge for each household. If this system were adopted, more valuable homes would pay a higher digital licence fee than less valuable ones. This is the same principle that Sky adopts in charging public houses for broadcasting sports programmes.

THE COUNCIL TAX

  The council tax was introduced in 1993, as the replacement for the community charge, or poll tax. It is the source of that part of a local authority's revenue raised locally, rather than received directly from central government.

  The council tax is fundamentally a property-based tax. Every domestic property is allocated to one of eight council tax bands, according to an assessment of its capital value. The lowest band is band A, and the highest is band H.

  In the first instance, two factors determine how much council tax a household has to pay. First, each local authority decides how much council tax to levy on a band D property. Second, a set of multipliers, laid down in the legislation, gives the proportion or multiple of that band D rate to be paid by any other domestic property within the local authority area.

  The table shows these multipliers. By way of example, if the band D council tax were set at £600 per annum, a band A property would pay only two thirds as much (£400) while a band H property would pay twice as much (£1,200).

  The following table shows the amounts that would be levied on a property in each band if the overall revenue raised is to be equal to that raised from the application of a uniform, £24 charge. (It is based on the assumption that the same proportion of households in each band obtains a digital licence.) The relativities between the bands are determined according to the multiples given in the previous table.

DISCUSSION

  There are issues here of both principle and practice. The first issue of principle concerns the unfairness of levying the television licence, as with any tax, uniformly on all households. While it is not strictly correct to label the licence as a poll tax (being a charge per household rather than a charge per head), it is understandable that its uniformity should make it look like one.

  If the licence fee is not to be uniform, on what basis should it be levied? Clearly, any basis could in theory be introduced. But it seems far wiser to adopt an already existing system if a suitable one can be found. The attraction of the council tax band as the basis for the charge is that, like the television licence, it applies to households.

  Through their relation to property value, the council tax banding system does discriminate between households on the basis of wealth and income. Although necessarily rather crude, they do provide a device for bringing some relief from charges to those in the lower half of the income distribution. Their capacity to discriminate could be further enhanced in this case if the 25 per cent discount for single adult households (which is also part of the council tax system) were to apply.

  The use of the council tax bands for this purpose would be a significant extension of their role. There are, however, other household-related charges which could be based on the council tax. The best example are domestic water charges (for households who do not have a water meter). At present, these charges are still levied on the basis of the old domestic rateable values (the predecessor to the community charge). But the DETR has indicated that it would be prepared to consider proposals from water companies to replace this with the council tax banding system.

  Among the practical considerations, one is that the use of the council tax valuations for anything other than local authority finance could require a change in the legislation. Clearly, too, the appropriate authority would need to be in possession of the information on each property's council tax band in order to be able to implement the system.

  More fundamentally, even if one accepts the principle of a progressive charge, such as that based on the council tax, replacing a uniform one, the question still arises as to whether the size of the gains to those living in less valuable properties is sufficient to make it worth the trouble. It is a matter of judgment whether the gains for those in the less valuable properties shown in the table above would be worth it.

  A more radical variant than that illustrated in the table would be to base the whole of the digital licence fee (ie the basic fee and the supplement) on the council tax band. One effect of this would be to increase the "gain" to be had in the less valuable properties. But it would also mean that the move to digital, even with the supplement, would mean a lower overall fee for households in the lowest two bands than they are at present paying under the uniform fee. In other words, the 40 per cent of households with the lowest property values would actually face a financial incentive to switch to digital.

CONCLUSION

  Ultimately, the question of whether to replace a uniform fee with a progressive one is a political one, concerning both values and whether the gains are likely to be sufficient. If, however, there is an additional concern about "spreading digital" especially among the less well-off households, then the adoption of a progressive fee could introduce a financial incentive to switch for those for whom the sums of money involved may be significant.

  The New Policy Institute is an independent think tank, carrying out research into public policies to advance both social justice and economic efficiency. Last month, it published a report, Council Tax: The Case For Reform, which is the first comprehensive review of the council tax since its introduction in 1993. The work behind this report was supported by the Public and Commercial Service Union.

PCS INTRODUCTION

  PCS (the Public and Commercial Services Union) has a membership of around quarter of a million and is the largest union in the civil service and one of the biggest in the country. As well as members in government departments and agencies, we have members in non-departmental public bodies, other public sector areas and in some 200 private companies, predominantly engaged in delivering public services. We represent workers employed in a wide range of activities with a preponderance in executive and administrative positions. Our members are keen to deliver quality public services in as an efficient a manner as possible. It is often PCS members who are actually responsible for implementing government policies and making them a success. Where possible PCS tries to work in partnership with ministers and management in all the areas we represent.

December 1999